Bringing mobile money to the world

Editor's Note: Michael Joseph is the World Bank Group's first fellow and was previously the CEO of Safaricom.

Mobile money has gone viral. In Kenya there are now more than 15 million mobile money users, which is equivalent to three in four adults. The company I was heading until last November, Safaricom has developed the world’s largest mobile money platform M-Pesa, which is being used by more than 14 million Kenyans. Over the last three years the growth of mobile money has been exponential. In December we reached a new threshold when the equivalent of US$ 1 billion was transferred. This is more than Western Union has transferred in all of 2010 globally! This has changed the lives of Kenyans—it created new jobs, new businesses and new opportunities for millions of people.

Surely this can and must be replicated in other similar countries, many of which have better starting conditions than we had in Kenya. We have a great opportunity as the world is becoming more focused on financial inclusion with even the G20 group of countries embracing this concept as one of its objectives for this year. The World Bank has a unique and powerful position in the financial community to achieve this goal. The Bank has the stature and the relationship at senior government levels to influence the actions of financial regulatory bodies so that suitable regulations may be drafted or amended to allow for the introduction of mobile money.

As the World Bank’s first Fellow, my mission and personal goal is to prove that Safaricom’s M-Pesa is not a one-off and that it can and must be replicated elsewhere so that the benefits it has brought to the Kenyan population can be enjoyed and experienced by other nations as well.

In order to be successful, the World Bank Group and other development partners need to be better organized. There is great fragmentation with a long list of players (World Bank, IFC, CGAP, Gates, DFID, USAID to name a few), all of which have the same or similar objectives, but with different messages and agendas when talking to Governments, Bank Regulators, Operators and Banks. Unless we change this approach, the realization of mobile money will take much longer and therefore the benefits will not be felt by the people we are targeting.

Innovation and success only happens if there is a strong management structure with clear and timely decision making. While in Washington two weeks ago we made good progress. We decided on a common strategy to focus on a selected group of core countries and established a “mobile money core team” headed by Wolfgang Fengler, the Lead Economist in Nairobi who has been working with me closely already for several months.

As a first step we will review the mobile money potential of a suggested list of 16 countries (Indonesia, Bangladesh, Cambodia, Malaysia, Pakistan, Philippines, Brazil, Mexico, Peru, Morocco, Ethiopia, Ghana, Nigeria, Rwanda, South Sudan and Senegal as entry point to WAEMU). The analysis will look at key factors for the implementation of mobile money such as bank and mobile penetration, population disbursement and density, geographic size and physical difficulty, population size, Government subsidies and/or social payments, relationship with the respective Governments by the interested parties, etc. In mid-May we’ll then make a decision on the top five or six countries to be selected for immediate action and these countries would be our initial targets starting July. In the meantime, it would be great to hear from readers in the comments section about which of the 16 countries have the best potential for a large-scale system of mobile money.

The World Bank’s mission is to fight poverty. Mobile money can be a game changer for the poor. I am excited to be part of this agenda and look forward to working with the World Bank to help bring the benefits of mobile money to many parts of the world.

Comments

The world bank's approach to development needs more than tinkering- it needs a rehaul. If the true mission is to fight poverty, world bank investors need to look at the real life impact of projects they support.
The world bank sent investors to the village of Kulon Progo in Central Java, Indonesia to potentially invest in an iron mining project that has, even in its planning phases, created high levels of animosity between farmers and working class people, and those government employees and the upper class. Family members and neighbors are becoming enemies with the introduction of a project that provides economic stimulation in a place where it is not necessary, and with a project where the overwhelming majority opposes it.
Microfinance projects in Bali, Indonesia have created negative social impacts. For example, some lenders will only provide loans to farmers who commit to raising pigs that will be fed imported pig feed which leads to a larger pig, which grows at a faster rate. This is changing traditional methods of farming and is creating dependency on imported feed, whereas traditional methods of raising pigs do not require the purchase of pig feed at all.
It's time to assess how the money is being spent and how the loans are being disbursed- MFI ratings and incidence of default do not paint the full picture. The world bank has got some homework to do if their true mission to to fight poverty.

Michael
Mobile Money and Mobile Payments has to be the future, especially in emerging markets with few legacy systems but replicating mPesa will have it's challenges possibly primarily due to the catalyst required for changing behavior. mPesa arguably had the elections combined with Safaricom's market share which created a platform for exponential (and viral) adoption.
I can comment on the SSA markets in your shortlist. Besides the straightforward analytics your team is possibly running such as comparing mobile phones to bank accounts and overlaying that with wallet providers or MNO's you should also look at the history of the markets, culture for change, strength or the regulators and appetite for actually making change. The game certainly is on in Africa and Kenya has set the pace, so my views/pro's/cons of the SSA markets in order of priority are:
1) Ghana - although a smaller market than Nigeria the regulator has demonstrated the need for financial inclusion through the implementation of the domestic card scheme, the vote is still out whether this has been a success and what the uptake has been as there has been a great deal of capacity duplication to existing infrastructure, with mobile money this would not be the case. Ghana is also a small enough and well regulated market with not too many unknown factors which could influence the final outcome
2) Nigeria - this has to be in the top 2 just purely due to the size. The regulator has started passing quite a few policies over the last few years and has quite a strong influence in the market - the test will be how they respond to some of the 16 Mobile licence holders who do not put something out before the end of April. The concern for Nigeria would be whether the market has the structure or patience to work with a World Bank project and whether you will actually be able to derive results which you can analyse.
3) Rwanda - although smaller than Ethiopia in population terms it's certainly a country that is trying to get on the map as relates to infrastructure and technology, the project will have to look very carefully at the culture here though as it has been a slow moving market in terms of financial services but has also been dominated by domestic banks, this may however change with the international banks from West and East Africa. The concern would however be whether there is a commercial business case at the bottom end of the pyramid.
4) Ethiopia - although it's the second largest in terms of population it may need a lot of change management to change behavior. Regulatory policies may also be a challenge (last time I was there international SMS's didn't work due to Telecoms ministry concerns), so on paper there is probably a large business case but one has to ensure the culture is aligned.
I can't comment on Southern Sudan as that is an unknown market to most.
I'm not sure if the list is confirmed but if possible would suggest adding Tanzania and Zambia to the initial review. Tanzania has 4 mobile wallet providers and is possibly set to prove a "classic" model of how mobile money and payments should or could work. Zambia is similar to Ghana in the sense of a stable, well structured market where a well structured project should work well.
Hope that helps.

One of the reasons mobile money has scaled so well in Kenya is because Safaricom so dominated the mobile telephony market. That dominance meant that its national network of airtime sellers was extensive enough to make mobile money convenient and workable. Ironically, then, it may be that a monopoly-like cell provider is a key precondition for bid scaling of mobile money (especially since none of the cross-platform mobile money solutions appear to have gotten much traction anywhere

I don't know about 'best', but I do know that Indonesia has huge potential in mobile monetisation. Transactions take place with low value banknotes (1000 Rupiah most typically), which are kept in in physical form. Although consumer confidence is high in Indonesia, and the economy is rapidly growing, the pool of available capital is constrained for this reason. As one of the largest countries in the world, any increase in use of monetary services here has the possibility to lift a great number of people into the global middle class. Given that mobile penetration is high, but use of monetary services is low, the potential is certainly there.

In my view, South Sudan would be a good pick for a large-scale Mobile Money system considering that it is a country that has just come or is still at war with infrastructure such as roads still very poor. Mobile Money would therefore ensure timely delivery of funds from relatives and friends to cater for life needs like; buy food, pay school fees, bail out friends/colleagues, pay bills/utilities even where the bread-winner lives miles away.

Dear Michael,
Great article written by someone who has a good track record on the subject.
Concerning Mobile Money in Africa, African entrepreneurs in the various African markets will be key to the take off of Mobile Money across the African continent. It has been proven over and over that local African entrepreneurs are indeed enterprising can be very innovative in using technology to tackle local problems.
However, the foremost problem faced by African entrepreneurs is access to finance, especially attracting outside investment from the west. This is all the more difficult for African entrepreneurs who have not lived or studied in the west. This is well documented in the World Economic Forum’s annual Africa Competitiveness report, year after year. In their country-by-country list of the top hindrances to doing business in Africa, access to finance is always tops the list of most sub-Saharan African countries.
I would suggest that one of the things your initiative should focus on is bridging this gap by helping credible African businesses in the Mobile Money space gain access to finance/FDI.
Thanks.

I must admit I would have been quite disappointed not to find Nigeria on the list! The prospects for mobile money in Nigeria are huge especially with the penetration and explosion of the mobile sector in the last decade. Having worked in the foremost attempt at a mobile money solution in Nigeria, I am confident to say that under visionary leadership such as yours, there is indeed hope for developing mobile money in Nigeria. However, some of the biggest challenges you will face in replicating the M-Pesa model in Nigeria as you must have discovered is the fact that the Central Bank regulations restrict telecom companies from playing actively in the financial sector. This is quite understandable to protect Nigerian banks but it also cripples the chances of economic growth. How do you plan to overcome this in Nigeria which has a mobile phone user population of over 80 million people, a staggering figure that you cannot ignore if you want to develop mobile money in Africa.

We can all see how long it has taken us to move from grinding poverty to poverty. And this depends on out terminology. As long as we intend to eradicate poverty by focusing on poverty and pronouncing the word 'poverty', poverty and its attainment will be our focus, and eventually, end results.
Let use wealth creation, instead of poverty alleviation. Alleviating poverty does not necessarily translate to improving the situation of the target audience. When you alleviate poverty, you still have poverty. however, when you focus on wealth creation the psyche, the mind is raised and moved away from poverty towards wealth.

Clearly M"Pesa was a trigger, allowing carriers and their locally trusted brands, management structure to execute perfectly. Things have worked greatly in Kenya where has created a lot of "intangibles" (beyond the first mover's advantage) that are very hard to replicate :
At this stage, when extending to the rest of emerging markets, I think the service should evolve to be more ubiquitous, becoming a truly suited mobile payment mean for emerging markets. Few points (to cite few) that Mobile Money should address:
1) Delegated Payments : The main specificity in payment for emerging markets is the notion of "delegation". Given the unbalanced welfare distribution, a very 10% own probably 90%+ of available funds...thus 90% of the time, the buyer at store, is paying on behalf of a third party (fund's originator"). Payment becoSafaricomme a less a dual relation :buyer - merchant and more involving originator -> buyer -> merchant. The current payment networks haven't been designed for such relation. They ignore the funds originator ...who in this case has a lot of to say. Originator can be the family main worker, or remote parent (migrant) or grant agency (social welfare), etc ...and probably has various instructions and claims on spend conditions. A true payment system for emerging markets, i believe should strongly highlight this core specificity
2) Replacing cash : Cash seems invincible and to me is part of the main target for mobile money. A large portion of the cash payment transactions can be replaced easily by mobile money ...typically adding unique value either for the funds originator or for the merchant. It just requires a very suited approach.
3) Empowering local businesses : Above all, empowering local businesses ...that are the foundation of most african economies. Today's mobile money is very consumer oriented and less merchant friendly. Micro-merchants, producers, craftsmen, schools, hospitals, grocery stores, etc ...should be a true target, allowing them to grow and create jobs. Getting informal businesses to access funding and grow, get better organized to address larger, international markets is to me key to get many countries out of their current situations.
WIth these on top of existing service, i believe extending Mobile Money is create an even larger impact.
I think also that a blend of sub-Saharan, latin american, northern africa, and south east asian piloting could be great approach. In each region, select a strong regional hub as part of the early pilots. Nigeria/Ghana seems to me key duo in English speaking west africa, Senegal/Mali in french speaking, I guess Philippines/Indonesia, Brazil/Peru.

Clearly M"Pesa was a trigger, allowing carriers and their locally trusted brands, management structure to execute perfectly. Things have worked greatly in Kenya where has created a lot of "intangibles" (beyond the first mover's advantage) that are very hard to replicate :
At this stage, when extending to the rest of emerging markets, I think the service should evolve to be more ubiquitous, becoming a truly suited mobile payment mean for emerging markets. Few points (to cite few) that Mobile Money should address:
1) Delegated Payments : The main specificity in payment for emerging markets is the notion of "delegation". Given the unbalanced welfare distribution, a very few 10% own over 90% of available funds...thus at 90% of transactions, the buyer at store, is paying on behalf of a third party : fund's "originator". The payment transaction become "Originator -> Buyer - > merchant relation. Current payment networks haven't been designed for such relation. They ignore that originator ...who is the main decision maker in the transaction. Originator can be the family main worker, a remote parent etc ...and has various instructions and claims that today, aren't taken into account. A true payment system for emerging markets, i believe should strongly highlight this core specificity
2) Empowering local businesses :The foundation of most emerging economies. Today's mobile money is consumer oriented (historically for P2P transfers) and less merchant "friendly". Micro-merchants, producers, craftsmen, schools, hospitals, grocery stores, etc ...should be a true target, allowing them to grow and create jobs. Getting informal businesses to access "funding" and get better organized to address larger, even international markets is key to get many countries out of their current situations.
....
With These on top of existing service, i believe extending Mobile Money will create an even larger impact.
The best launch strategy is probably a blend of African, Latin American, and South Asian pilots: In each region, there are strong regional hubs to start with : Nigeria/Ghana in English speaking west africa, Senegal/Mali in french speaking, Philippines/Indonesia, Brazil/Peru would be my best bet.

Nigeria, by far among the 15 other countries, has a market for the growth of mobile money. It represents a very strong potential and there are significant opportunities for this payment and settlement system to thrive in the economy.
With a population of over 150 million and the spread of poverty among the populace, this concept will help generate employment opportunities and lift a significant proportion out of the circle of want as well as provide a veritable avenue for the unbanked in the society to be integrated into the mobile financial system.
The statistics per teledensity will also work in favour of actualising and making success out of this strategic initiative. From 2001 when licences were issued to mobile telephone operators, subscriber have risen from about 422,000 (2001) to about 73 million by the end of 2009. With such a large number of mobile phone users, a lot of ground will be covered.
I believe the achievement in Kenya will be surpassed in Nigeria due to the high population (over 150m) and teledensity. This is a huge market that signposts strong opportunities for mobile money. I am optimistic that the Kenyan and safaricom model will work very well in Nigeria as the demoraphy, environment, culture, consumer/customer behaviour, etc. speak to the same truism.
At the individual level, I am enthusiastic about this new dawn and would be glad to be part of the team midwifing this ground breaking developmental programme.

Nations with high population and mobiteledensity such as Nigeria have great opportunity for mobile banking. However, intervention and innovation in what i called in my book 'Corporate Governance Matrix and the Morality of the Corporation' as the 7 areas of corporate governance matrix: legality, morality, economic efficiency, politics, time closure, etc. In Nigeria, we have come to the conclusion that d m-pesa or orange models of kenya would not work. PayModem (www.paymodem), due to be launched November 21, 2011 is our response to the Nigerian need.

Looking at the astronomical growth recorded by mobile operators in Nigeria you have no option than to agree with me that this operation will not only thrive in the country it will also record a huge success in a short period with a suitable growth rate.
I will not over emphasize on the success of the mobile money in Nigeria but will be delighted to be a part of this welcome development.
As an IT expert, I can make bankable predictions in this vibrant sector of Nigeria’s economy, because the future of mobile money in Nigeria is promising.
Looking at the size of Nigeria the Kenya success will be like tripled, with over 150 million population success if the key word.
www.yhhf.org

Am one year late on this article but I had to chip in. I don't know what is more interesting, the main article by Joseph or the comments!
Being a Kenyan living in Nairobi, am 100% immersed in the day to day transactions of mobile money. I love it. Don't know how we survived without it.
As in IT entrepreneur in this field, I'd say the biggest challenge we have in expanding Mpesa's capabilities and taking it to fields unknown is Mpesa's service guarantees and network availability. I don't have the official stats but there are outages by Mpesa or connectivity to Mpesa which hinder any solution going fully fledged on Mpesa. It would be suicidal to build a solution that requires 100% up-time around Mpesa service.
MNOs need to provide an SLA that is as good if not better than the Visa service. We need Safaricom to take responsibility -financially even by compensation- when a merchant is not able to receive his payment because Mpesa is experiencing delays or its totally out. Or introduce an offline version of it. How? I don't know. I sure would like to research on it.
As I write we are working on a real time solution for the masses but we've had to put a work around that gives an option to write cheques and pay cash while ideally we'd have gone 100% automated on mobile money.
Solve that and Mpesa (and its clones) will be ready for the whole world. Not just the third world.

Permit me to air my views on this important and interesting subject matter.
I really do not fancy replicating the SAFARICOM Model on any other economy. Safaricom as some of us know has roughly about 70% stake of the Kenya mobile telecoms market.
So, it was easier for Kenyans to adopt MPESA as a self-service financial channel. More so, statistics equally pointed out before the commencement of MPESA, that about 65% of the adult population in Kenya did not have access to formal bank accounts.
A lot of factors played out to the success of MPESA when it was launched in March, 2007.
That MPESA is a success story in the world as an innovative brand cannot be under-emphasized but whether this MPESA model can be replicated in another developing country is quite difficult to say. Technology adoption rate differs across board.
Methinks, what is fundamentally important is to look at the peculiarities of countries and come up with mobile money ecosystem that suits well to these countries.
The Nigerian mobile ecosystem as we have been made to believe by the county's apex bank-CBN would mainly be in the purview of traditional banking institutions and other independent mobile money platform providers -MMOs. The Telcos are partners in progress.
So if the World Bank and other international organisations are sincere in financial cum digital inclusion,there is a need to do an extensive data analysis of these countries. MPESA succeeded in Kenya due to the peculiarity of the Kenyan economy and this does not guarantee that the MPESA model would thrive elsewhere.
More so, for mobile money to really thrive, we must not fail to look at the fee-based structure. Most times, those in the bottom of the pyramid feel the pain the most because a large chunk of their incomes are paid as fees for their supposedly small ticket transactions. This in a is antithetical to combating poverty.
I equally believe the onus is also on most governments to invest in infrastructures.Technology cannot thrive in any domain without the necessary infrastructures in place. The rural population of most third world countries are worse off because they lack basic social amenities. In a way, they have been cut off from this knowledge based economy.
Mobile money could indeed make a difference amongst the vast population of third world economies if there is a fair regulation in place coupled with some of the factors I have highlighted.
Despite the fact that the Nigerian market is a huge marketing opportunities, so many leakages in the system has inhibited real economic growth.
I hope the success of MPESA can really lead to more forward thinking on mobile money ecosystem and ultimately lead to both financial and digital inclusion across all segments of developing economies.
Chris Osakwe
Master's Research Student
CZU,Praha

The real value in MPESA is not as a money-transfer system ~ as another toy to make rich people richer ~ but as a world poverty game-changer ~ to stop people dying.
If the World Bank really is serious about improving everything for everybody, and especially the lot of the world's poorest people, then rather than having armies of WB worker ants creating mountains of reports to make sure they get 'optimum ROI' ~ and their collective asses covered ~ they should be investing in it and funding it so they can take it immediately to where it will do the most good.
There can only be one group of countries that meet that criteria and they are the LDC.
The 48 least developed countries ~ 16 landlocked, 11 small islands, population 2010: 832.33 Million, Projected Population 2020: 1.04 Billion.
In 40 years the LDC category has existed ~ and of WB and UN tinkering ~ only 3 countries have graduated from the LDC ~ Botswana, Cape Verde, and the Maldives. One more ~ Samoa ~ is slated to exit in 2014, but that remains to be seen.
UNICEF says, in the LDC, 27,000 children die every day due to poverty.
How many of those children could be saved, not to mention the improvement in the lives of millions of others, with an economically vibrant and commercially competitive population of 1.04 Billion?
If you have a conscience, MJ, for all our sake, start with the LDC first.